Correlation Between Ondo and Lumia
Can any of the company-specific risk be diversified away by investing in both Ondo and Lumia at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Ondo and Lumia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ondo and Lumia, you can compare the effects of market volatilities on Ondo and Lumia and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Ondo with a short position of Lumia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ondo and Lumia.
Diversification Opportunities for Ondo and Lumia
Poor diversification
The 3 months correlation between Ondo and Lumia is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Ondo and Lumia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumia and Ondo is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Ondo are associated (or correlated) with Lumia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lumia has no effect on the direction of Ondo i.e., Ondo and Lumia go up and down completely randomly.
Pair Corralation between Ondo and Lumia
Assuming the 90 days trading horizon Ondo is expected to under-perform the Lumia. But the crypto coin apears to be less risky and, when comparing its historical volatility, Ondo is 32.78 times less risky than Lumia. The crypto coin trades about -0.19 of its potential returns per unit of risk. The Lumia is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 0.00 in Lumia on October 11, 2024 and sell it today you would earn a total of 120.00 from holding Lumia or generate 9.223372036854776E16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Ondo vs. Lumia
Performance |
| Timeline |
| Ondo |
| Lumia |
Ondo and Lumia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ondo and Lumia
The main advantage of trading using opposite Ondo and Lumia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ondo position performs unexpectedly, Lumia can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Lumia will offset losses from the drop in Lumia's long position.The idea behind Ondo and Lumia pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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